A loophole that drove a marketing strategy

The Post-9/11 GI Bill is one of the most generous federal education benefits programs in American history. The Forever GI Bill (2017) eliminated the 15-year usage limit, expanded coverage for purple-heart recipients, and added flexibility for post-service education. The benefits are substantial: full tuition at in-state public colleges, capped tuition at private and out-of-state colleges, monthly housing allowance, books and supplies stipends.

The benefits have also been a magnet for predatory practices by certain for-profit colleges, in a pattern shaped by a structural quirk in federal regulation.

The 90/10 rule limits for-profit colleges to 90% of their revenue from federal financial aid sources. The intent is to prevent for-profits from operating as effectively wholly federal-funded enterprises — schools that depend on the federal aid system entirely should, the rule’s logic runs, demonstrate at least some non-federal market validation.

For decades, the rule had a critical exclusion: GI Bill payments and Department of Defense tuition assistance were counted as “private” revenue, not federal aid, for purposes of the 90/10 calculation. The result: a for-profit college could comply with the 90/10 rule by enrolling enough veterans to push its non-Federal-Pell-and-Direct-Loan revenue above 10%. Each veteran enrolled was, in effect, a regulatory permission slip to enroll additional Pell-and-Direct-Loan recipients.

The predictable response: aggressive marketing to veterans.

What the marketing pattern looked like

Investigations and Department of Education enforcement actions have documented the pattern across multiple major for-profit chains over the past 15 years:

Targeted recruitment. Some for-profits maintained dedicated military recruitment teams that operated on military bases, at military events, and through military-targeted media. Recruitment scripts often emphasized GI Bill maximization rather than fit between veteran and program.

Misleading employment outcome claims. Many programs made employment-outcome claims (job placement rates, average starting salaries) that subsequent investigation showed were not supported by actual graduate outcomes.

Pressure tactics. Sales-style enrollment processes that emphasized closing the enrollment quickly, before the prospective student could compare alternatives or seek independent advice.

Article 41 issues. Some for-profits enrolled active-duty service members in programs whose schedules were incompatible with active military duties — producing high attrition, GI Bill expenditure without educational benefit, and frequent disputes.

Closure and credit transfer. Several major for-profit chains have closed during the post-2010 period (Corinthian Colleges, ITT Tech, Education Corporation of America). When for-profits close, students often find that credits earned do not transfer to other institutions — leaving the student with debt (where Pell grants and Direct Loans are involved) and no completed credential.

The cumulative effect: a meaningful share of GI Bill spending flowed to for-profit colleges that produced poor outcomes for the veterans they enrolled. The enrollment pattern was not, on the empirical record, driven by quality matching.

What the 2021 reform did

The Consolidated Appropriations Act, 2021 included a long-awaited reform to the 90/10 rule: GI Bill payments and DOD tuition assistance now count as federal aid for purposes of the 90/10 calculation.

The reform’s mechanism is straightforward. For-profit colleges that had relied on veteran enrollment to pad their non-federal-revenue side of the 90/10 calculation now face the same compliance pressure with veteran tuition as with Pell and Direct Loan revenue. The structural incentive for predatory veteran-targeting is reduced.

The reform took effect for the 2022-2023 fiscal year and is now in implementation. Early indicators:

Enrollment shifts. Some for-profits have reduced their veteran-recruitment intensity. Others have struggled to maintain 90/10 compliance and have closed or contracted.

Compliance failures. Several for-profits have failed 90/10 compliance under the new rules; consequences range from sanctions to loss of Title IV eligibility.

Continued enforcement. The Department of Education continues to bring borrower-defense actions against closed and operating for-profits whose practices defrauded students. Veterans are eligible for borrower-defense relief on the same terms as other students.

90/10 enforcement intensity. The mechanical compliance is straightforward; the question of whether the Department of Education enforces the rule rigorously across implementations has been politically contested across administrations.

Borrower defense and veteran relief

The borrower-defense framework provides relief to students whose schools defrauded them or made misrepresentations they relied on in enrolling. For veterans who attended now-closed or operating-but-fraudulent for-profits, borrower-defense discharge can eliminate Direct Loan and Pell-related debt. (GI Bill is grant-based and does not produce debt; the relief framework applies to other federal aid the student received.)

Borrower-defense processing has been complex. Each presidential administration has had different approaches to processing borrower-defense claims, with substantial backlogs accumulating during slow-processing periods and discharges flowing during faster-processing periods. Veterans whose for-profit experience meets borrower-defense standards have benefited substantially when discharge has been processed.

The continuing reform agenda

Several follow-on reforms remain on the agenda:

90/10 enforcement intensity. Continued Department of Education attention to compliance. Public reporting on individual school 90/10 compliance ratios. Sanctions for non-compliance applied consistently.

Gainful employment rule. The federal gainful-employment rule, which conditions Title IV eligibility on whether a program’s graduates can repay their loans, has been adopted, repealed, and re-adopted multiple times depending on which party controls the Department of Education. Durable codification would prevent future cycles of repeal.

Improved outcomes data. Better public reporting on for-profit-college outcomes — completion rates, employment outcomes, debt loads — would reduce the information asymmetry that predatory marketing exploits.

Veterans-specific protections. The Principles of Excellence and the Veterans Education Empowerment Act framework provide veteran-specific protections; continued strengthening would close remaining gaps.

Closed-school discharge. Veterans who attended schools that subsequently closed are eligible for closed-school discharge under defined timelines. Process improvements would reduce friction for veterans seeking relief.

Servicemember civil relief. The Servicemembers Civil Relief Act provides certain protections for active-duty service members; expansion to cover education-related contracts more comprehensively has been proposed.

What to watch

• Department of Education 90/10 compliance reporting.
• For-profit college closures and the resulting borrower-defense and closed-school discharge volumes.
• Gainful employment rule status. Subject to ongoing administrative reversal.
• Veterans Education Empowerment Act and similar veteran-specific proposals.
• Borrower-defense processing rates and outcomes.
• Federal Trade Commission enforcement against for-profit colleges; the FTC has substantial consumer-protection authority that intersects this area.

Bottom line

The 2021 90/10 reform addressed the most consequential structural incentive driving for-profit-college targeting of veterans. Two-plus years into implementation, the reform is producing measurable results. Continued enforcement, gainful-employment rule durability, and borrower-defense responsiveness remain active priorities. The federal commitment to veterans embodied in the GI Bill is most fully honored when the spending it enables produces actual educational benefit — not when it flows to institutions whose business model depends on extracting it without delivering on what it was meant to support.